As the year closes, a few deliberate moves before December 31 can deliver a powerful double benefit: current-year income-tax savings and longer-term estate planning advantages. With limits resetting on January 1, this is the moment to finalize transfers, confirm paperwork, and document your gifts. A well-designed combination of family gifts and charitable contributions can lower taxable income, reduce future estate exposure, and support people and causes you value.

1) Use the 2025 Annual Gift Tax Exclusion ($19,000 per recipient)

For 2025, you may give up to $19,000 to each recipient –- children, grandchildren, or anyone else –- without using any of your lifetime federal gift and estate tax exemption or paying gift tax. Married couples can effectively double this via gift-splitting, enabling $38,000 per recipient when both spouses consent. These present-interest gifts are straightforward, and when you stay at or below the exclusion for a given recipient, a federal gift tax return is typically unnecessary.

Why it matters. Exclusion-eligible gifts immediately reduce your taxable estate. If you expect an asset to appreciate, shifting value now removes both current value and future growth from estate tax calculations. Repeating this annually across multiple recipients can transfer meaningful wealth tax-efficiently over time.

Timing. The exclusion is “use it or lose it.” To apply the 2025 limit, complete gifts by December 31, 2025. Unused amounts do not carry into 2026. If you’re gifting to several recipients or transferring securities, plan early and confirm custodian deadlines to avoid year-end bottlenecks.

If you exceed $19,000. The excess reduces your lifetime exemption. Most families do not pay out-of-pocket gift tax because the exemption remains substantial; however, you would file a gift tax return to report amounts above the annual exclusion or to elect gift-splitting.

2) Lean Into Charitable Giving Before December 31

Charitable contributions made by year-end can reduce your current-year taxable income if you itemize deductions. To qualify, the recipient must be a recognized charitable organization, and you should retain written acknowledgments for your records. Documentation rules vary by gift type and size; keep receipts and follow substantiation requirements carefully.

Appreciated securities. Donating long-term appreciated stock or mutual fund shares directly to a qualified charity can produce two advantages: (1) an income-tax deduction generally based on fair market value and (2) avoidance of the capital gains tax you would owe if you sold the asset yourself. The charity can sell without paying tax, so more of your contribution supports its mission. If an asset has declined in value, consider selling it first to harvest the capital loss and then donate the cash proceeds, potentially capturing both the loss and the charitable deduction (subject to applicable limits).

Donor-advised funds (DAFs). A DAF lets you contribute cash or appreciated assets now, take an immediate deduction if you itemize, and recommend grants to operating charities later. This is especially helpful when you want the tax benefit this year but need more time to choose beneficiaries.

Charitable Remainder Trusts (CRTs). A CRT lets you transfer appreciated assets into an irrevocable trust, receive an immediate partial charitable deduction, and retain income payments for yourself or other beneficiaries during your lifetime or a set term. When the trust ends, the remaining assets go to one or more charities. This approach can reduce capital gains taxes and create a lasting charitable legacy. This tool is especially helpful if you own a company that is planning to sell in the same tax year.

Operational details. Transfers must be completed by December 31. For stock gifts, the charity’s brokerage must receive the shares; for checks, mailing dates can matter; for credit card donations, the charge must post in time. Build in a cushion for processing delays, especially in the last week of December.

3) Qualified Charitable Distributions (QCDs) from IRAs

If you are age 70½ or older, a Qualified Charitable Distribution allows you to direct funds straight from your IRA to a qualifying charity. QCDs can satisfy required minimum distributions and, crucially, are excluded from taxable income. Lowering adjusted gross income can also help with Medicare premium surcharges and other income-based thresholds. QCDs must move directly from the IRA custodian to the charity, and not all accounts qualify. Coordinate with your custodian to meet operational requirements before year-end and keep confirmation letters for your files.

4) Virginia vs. Federal: What Taxes Apply?

Virginia imposes no state estate or inheritance tax and has no separate gift tax. For Virginians, that simplifies planning: your focus is primarily on federal income, gift, and estate tax rules. If you own property or maintain connections in another state with its own estate or inheritance tax, review those local rules, because they may affect your plan.

At the federal level, gift and estate taxes are unified. Gifts above the annual exclusion consume your lifetime exemption, but out-of-pocket gift tax is unusual because the exemption remains high for most families. Large lifetime gifts can be an effective way to remove appreciating assets from your taxable estate. Charitable bequests at death are generally deductible for estate tax purposes, and lifetime charitable gifts advance your philanthropic goals while reducing assets that might otherwise face transfer taxes.

5) Practical Steps to Finish Strong Before Year-End

Clarify your goals. Decide whether your priority is current income-tax savings, long-term estate reduction, or both. Your goals guide whether to emphasize annual exclusion gifts to family, appreciated asset donations to charity, QCDs from IRAs, or a blend.

Choose the right asset. Cash is simple; appreciated securities can amplify tax benefits for itemizers. Use annual exclusion gifts to move value you expect to grow; use charitable gifts for highly appreciated positions where avoiding capital gains is most valuable.

Mind the mechanics. Brokers and custodians often have earlier cutoffs than December 31 for stock transfers; DAF sponsors need time to process contributions; IRA custodians have specific QCD procedures. Start now, confirm forms, and track confirmations.

Document carefully. Keep acknowledgments for charitable gifts and follow valuation rules for non-cash contributions. For larger gifts to individuals, record amounts, and dates. If you are making gifts above the annual exclusion or electing gift-splitting, plan to file a gift tax return.

FAQs

Do I need to file a gift tax return if I stay under $19,000 per recipient?
Generally, no. If you remain at or below the exclusion for each recipient, a return is typically unnecessary. If you exceed the limit or elect gift-splitting, expect to file.

Can I carry over unused annual exclusion to next year?
No. The annual exclusion resets on January 1. Complete 2025 gifts by December 31, 2025.

Do charitable gifts reduce my estate too?
Yes. Lifetime charitable gifts remove assets from your estate, and charitable bequests at death are generally deductible for federal estate tax purposes.

If you are considering appreciated securities, QCDs, donor-advised funds, or larger transfers that tap lifetime exemption, please reach out to Justin Banford at (703) 284-7253 or jbanford@beankinney.com.

This article is for general informational purposes only and does not contain or convey legal or tax advice. Consult a lawyer or tax professional for advice specific to your situation. Any views or opinions expressed herein are those of the authors and are not necessarily the views of any client.